The trend of settling abroad for better career opportunities, better standard of living at low costs, and savings is not entirely new in the U.S. This is actually a viable option in certain countries which have a great economy along with a lower cost of living. Settling in such countries may ensure that you not only save money but earn some profits too.
These countries include the BRIC nations (Brazil, Russia, India, and China). With lucrative incentives like encouraging opportunities in terms of investments, easy personal loans with a low rate of interest and other financial incentives, settling here does ensure a bright future. However, before making any full-proof plans in investing abroad, a thorough understanding of the financial implication of leaving the U.S. is essential. And, as always, a sound planning and early preparation are also very helpful. Here are a few pointers to refer to:
1. Time to start saving!
Before contemplating the idea of moving abroad, it is recommended to save as much as possible in your savings account. A general estimation is, at least seven-nine months of living expenses to be saved in the bank beforehand. However, this amount is completely dependent on your lifestyle, job, family status and most importantly, the local currency exchange rate.
The idea is to cover the primary requirements through these seven-nine months savings, which includes housing costs and necessary healthcare.
2. Create a budget plan.
You’ve streamlined your savings, great! Now it is time to streamline your budget for your stay in the new country. All considerations for expenses in the new place should be made carefully otherwise your savings would not last as long as you had projected it to.
Online expat blogs, comparison charts of the cost of living and cost of daily essentials should be taken into consideration while planning the budget.
A few months’ time is all you need after settling there to understand the nature of your expenditure and then you can streamline your expenses accordingly.
3. Decide your bank beforehand.
The local banks’ international clearing networks, availability of U.S.-style credit cards, participation in consumer-tailored networks or partnerships are the things that are needed for consideration. Also, banks offering good interest rates on personal loans or mortgages, good ATM access, and guaranteed bank deposits should always be put on the top of the list.
Make sure that the bank of your choice complies with the Foreign Account Tax Compliance.
4. Set up your bank account.
Get a head start on the whole process by opting to open an account in the bank well before the date of moving. This is to ensure that there will be no unnecessary financial stress or inconveniences faced once you reach your destination.
All U.S. citizens and green card holders are required to file returns and pay taxes even when they are out of the U.S and paying their taxes in their host countries. ‘Double-taxing’ is not necessary for these situations because of the ‘Foreign Earned Income Exclusion’. This allows people with foreign earned income less than $104,100 in 2018 and qualifying with certain residency time tests not to pay taxes to the U.S. However, filing returns is still recommended.
These regulations involve a lot of policies and complexities, and therefore, should be discussed in details with a financial advisor before leaving the U.S.
6. Save for retirement.
Irrespective of how easy it is to live in the host country, it is always the best idea to save for retirement. It is easy if you are working for a company with a 401 (k) plan. However, if your company’s policy excludes expats, enquire if the policy can be amended.
If you have not been required to pay U.S. taxes owing to the Foreign Earned Income Exclusion, you can look for some alternatives. Establishing a brokerage or savings account for retirement are the safest bets here.
7. Credit check, please!
There have been cases where people living abroad have returned and tried buying a house or a car and failed because of a low credit score. Leaving the U.S. to live abroad could affect your credit score heavily; inviting financial troubles when you return home, consequently.
It is easier to maintain the credit score while living abroad than to start from the scratch all over again. You just have to use your U.S. credit cards a few times a year. This does not require any sizeable purchase too; a couple of books or pieces of clothes would suffice. Just make sure to pay off the debt well in time. This is the secret to a pristine credit score while living aboard.